In the United States, consumer prices rose at the fastest annual rate in nearly 40 years last month. Inflation is eroding paycheques and increasing pressure on the Federal Reserve (Fed) to tighten policy as a result of rapid and persistent inflation.
Data from the Labor Department shows that the Consumer Price Index (CPI) increased 6.8% from November 2020. Over the past month, the widely followed inflation gauge rose 0.8%, exceeding forecasts and continuing the trend of significant increases that began earlier this year.
In a Bloomberg survey, economists expected an annual gain of 6.8% and a monthly gain of 0.7%. The 10-year Treasury yield fell, while the S&P 500 index futures increased and the dollar declined.
Pressure over increasing inflation
In most categories, there was an increase in the CPI. The major contributors to the increase month-over-month were gasoline, shelter, food, and vehicles. As a result, expectations are rising that the Fed will wind down its bond-buying programme at its final meeting of the year next week.
As workers spend more at the grocery store and at the gas pump, the Fed and Biden are under increasing pressure to address rising inflation.
In a faster tapering scenario, the Fed could increase interest rates by the middle of next year, as markets now expect. Annual CPI increases are predicted to hover around 7% into 2022.
Core prices, which exclude volatile food and energy components, rose 0.5% from a month earlier. Core CPI rose 4.9% from a year ago, a record 30-year high.
In November, shelter costs – which constitute a third of the CPI – rose 0.5% from a month earlier.
This was the largest gain since 2007 compared to the same period last year. Rents and home prices are expected to increase next year, pushing up housing costs according to the inflation calculator.